Former president Donald Trump relinquished the Trump Organization to his sons and Allen Weisselberg when he took office in 2017.
In the next week or so, he could take steps towards giving up control again, now to a court-approved receiver after a New York judge ruled that Attorney General Letitia James could cancel legal certificates that allow some Trump companies to do business in New York.
Trump’s team wants more details and could request a stay on the receivership decision. If he can’t stop the courts from putting trophy properties like 40 Wall Street and Trump Tower into receivership, Trump wouldn’t be the first real estate giant whose buildings have ended up this way.
Most of the time, a receiver is appointed in foreclosure cases or when an owner won’t make repairs. Sources told The Real Deal that a receiver being called in on the Trump case puts the to-be-appointed person in the middle of an unusual situation. Receivers effectively manage properties while legal proceedings conclude, and after that, they prepare the properties for sale in a way to maximize the return. Rulings like this in non-foreclosure cases are usually reserved for illegal operations engaged in broad fraud.
“Typically, you ask the court to cancel the business certificate, and a court will decline,” said Lee Bergstein, a lawyer at Bergstein Flynn Knowlton and Pollina. “The fact that the court is [pursuing] this remedy is certainly unique. I can’t say that it hasn’t been done before, but I haven’t been involved in a case where I’ve seen a court order this type of remedy.”
Engoron’s ruling orders Trump and New York Attorney General Latitia James’s office to suggest no more than three potential receivers within 10 days of Sept. 26. The actual appointment could be months away. Another non-jury trial held in Engoron’s court is set to begin Monday to rule on outstanding issues in the case. It will go forward after an appellate court rejected Trump’s attempt to postpone.
The duties of a receiver include collecting rent, managing tenant relationships, making needed repairs, keeping financial books, paying taxes and insurance premium, negotiating expiring leases and anything involved in managing the property to protect the value of the property. Receivers appear to need nothing more than a certification, but they are usually lawyers. After the financial crisis, troubled condos, rental buildings and even in-progress projects ended up with receivers. Receivers don’t make much money: 95% of rent and other revenue goes into the property, with 5% left for their fee.
In this case, the receiver will need experience managing a vast portfolio of varying assets that consist of office buildings, residential towers and golf courses named in the ruling, in addition to basic qualifications stipulated in statute.
Read more
Commercial
New York
Trump ruling casts confusion over fate of properties
National
NY attorney general accuses Trump of inflating property values by $2.2B
It’s a monumental task that will require subsequent permissions from Engoron to seize rent rolls, security deposits, service contracts and anything else needed for operation of the properties. Owners typically want to leave properties in good working order so they can reclaim them in similar shape.
Trump’s lawyers suggested Barbara Jones, a former U.S. district court judge who served as monitor in the case, and she is likely the frontrunner for the position. As monitor, Jones concluded that Trump’s financial disclosures were inconsistent and incomplete, which played a role in Enogron’s rulings.
“Judge Jones has impeccable credentials, broad experience and the gravitas to effectively handle such an assignment,” said Michael Miller, a New York based lawyer with experience serving as a receiver and the president of the New York State Bar Association. “She would certainly be highly qualified for such a challenging and high-profile assignment.”